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Sharing as Risk Pooling in a Social Dilemma Experiment

Author

Listed:
  • Todd Cherry

    (Department of Economics, Appalachian State University)

  • E. Lance Howe

    (Department of Economics, University of Alaska Anchorage)

  • James J. Murphy

    (Department of Economics, University of Alaska Anchorage)

Abstract

In rural economies with missing or incomplete markets, idiosyncratic risk is frequently pooled through informal networks. Idiosyncratic shocks, however, are not limited to private goods but can also restrict an individual from partaking in or benefitting from a collective activity. In these situations, a group must decide whether to provide insurance to the affected member. In this paper, we describe results of a laboratory experiment designed to test whether a simple sharing institution can sustain risk pooling in a social dilemma with idiosyncratic risk. We test whether risk can be pooled without a commitment device and, separately, whether effective risk pooling induces greater cooperation in the social dilemma. We find that even in the absence of a commitment device or reputational considerations, subjects voluntarily pool risk thereby reducing variance in individual earnings. In spite of effective risk pooling, however, cooperation in the social dilemma is unaffected.

Suggested Citation

  • Todd Cherry & E. Lance Howe & James J. Murphy, 2012. "Sharing as Risk Pooling in a Social Dilemma Experiment," Working Papers 2012-01, University of Alaska Anchorage, Department of Economics.
  • Handle: RePEc:ala:wpaper:2012-01
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    References listed on IDEAS

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    Cited by:

    1. Carlos A. Chávez & James J. Murphy & John K. Stranlund, 2021. "Co-enforcement of Common Pool Resources to Deter Encroachment: Evidence from a Field Experiment in Chile," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(2), pages 425-450, October.
    2. E Lance Howe & James J Murphy & Drew Gerkey & Colin Thor West, 2016. "Indirect Reciprocity, Resource Sharing, and Environmental Risk: Evidence from Field Experiments in Siberia," PLOS ONE, Public Library of Science, vol. 11(7), pages 1-17, July.
    3. Vesely, Stepan & Wengström, Erik, 2017. "Risk and Cooperation: Experimental Evidence from Stochastic Public Good Games," Working Papers 2017:3, Lund University, Department of Economics.
    4. Bilancini, Ennio & Boncinelli, Leonardo & Nardi, Chiara & Pizziol, Veronica, 2023. "Cooperation is unaffected by the threat of severe adverse events in Public Goods Games," OSF Preprints yrt63, Center for Open Science.
    5. Angela C. M. Oliveira, 2021. "When risky decisions generate externalities," Journal of Risk and Uncertainty, Springer, vol. 63(1), pages 59-79, August.
    6. Astrid Hopfensitz & César Mantilla & Josepa Miquel-Florensa, 2019. "Catch Uncertainty and Reward Schemes in a Commons Dilemma: An Experimental Study," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(4), pages 1121-1153, April.
    7. Howe, E. Lance & Murphy, James J. & Gerkey, Drew & Stoddard, Olga B. & West, Colin Thor, 2023. "Sharing, social norms, and social distance: Experimental evidence from Russia and Western Alaska," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 345-358.
    8. Zhang, Huanren, 2019. "Common fate motivates cooperation: The influence of risks on contributions to public goods," Journal of Economic Psychology, Elsevier, vol. 70(C), pages 12-21.
    9. Marco A. Janssen & Therese Lindahl & James J. Murphy, 2015. "Advancing the Understanding of Behavior in Social-Ecological Systems: Results from Lab and Field Experiments," Working Papers 2015-05, University of Alaska Anchorage, Department of Economics.

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    More about this item

    Keywords

    lab experiment; public goods; risk; shock; sharing; experimental economics; environmental economics;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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